Finance, Business

US growth fears rattle the markets

26 March 2020

US growth fears rattle the markets

The US fiscal response to fill this hit to economic activity is accelerating, but for now, the impact of the containment measures is still overwhelming the policy. In Washington, negotiations are underway on a third stimulus package expected to exceed USD 1 trillion (roughly 5–7% of GDP), with the aim of reaching a deal by tonight so that legislation can be passed by Congress and signed into law early next week. We expect policymakers’ willingness to do even more to help prevent a global financial crisis-style credit crunch.

The fiscal response in Europe has been larger measured as a percentage of GDP, which, along with the European Central Bank’s USD 750bn emergency bond purchase scheme, helps explain the relative outperformance of European equities the past two days. Today the UK government announced significant targeted fiscal support to combat the economic fallout from the virus, including a commitment to pay 80% of private-sector employees’ wages up to GBP 2,500 per month for three months, backdated to 1 March.

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Source: Getty Images

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